The global surge of energy prices to a permanently higher plateau may be occurring even more rapidly than I had expected. The price of oil has surged past $90 per barrel, up from $80 when I last took note on this blog. And if a new study by German-based Energy Watch Group is anywhere near correct, it could shoot far higher. That study, as reported by the Guardian, predicts that oil production peaked in 2006 and could decline as rapidly as 7 percent per year. Global oil production could tumble to half current levels by 2030. Folks, that’s only 23 years away.
“The world soon will not be able to produce all the oil it needs as demand is rising while supply is falling. This is a huge problem for the world economy,” said Hans-Josef Fell, EWG’s founder and the German MP behind the country’s successful support system for renewable energy.
Now, I’m not as pessimistic as the authors of this study, who have an explicit renewable energy agenda. I give more credit to the ability of capitalism to adapt. Higher energy prices will incentivize oil companies to explore in ever more remote places and make it economical to tap previously unprofitable reserves. We’ll see more deep-sea oil production, and more mining of shale and oil sands (with the attendant environmental costs). We’ll see more money plowed into solar, geothermal, nuclear and biomass forms of energy, more money spent to develop hybrids, fuel cells and electric cars.
But if the German study comes even close to accurately forecasting the future — even if oil production only declines at a rate of 2 or 3 percent per year — Virginia’s auto-centric, oil-dependent economy is in for a world of hurt. With global demand continuing to rise, prices will soar. One day, $90-per-barrel oil will seem like a bargain.
Virginia’s transportation system is designed for cheap energy: Virginians drive more than other Americans on average, which means we drive more than almost everyone else in the world. Because we consume more gasoline than almost anyone else, our standard of living is more vulnerable to rising petroleum and gasoline prices. Making matters worse, the higher price of petroleum also drives up the price of asphalt, a major constituent of roads: asphalt. The more lane-miles of road we build, the greater the ongoing maintenance cost we incur.
Virginia lawmakers, and the public, are still living in a dreamworld where they think that building more roads can solve our transportation problems. Wrong. Maintaining our current policies will not only prolong the traffic-congestion crisis and harm the environment, it will undermine our standard of living as the cost of gasoline claims an ever greater share of Virginians’ disposable income.
